Saturday, December 26, 2009

I just received this e-mail from Pupsy Orlando. I suspect that the Democrats are grooming him to run for president in eight years.

>I AM MR. PUPSY ORLANDO , THE CHIEF AUDITOR IN CHARGE OF FOREIGN REMITTANCE UNIT OF OUR BANK AND I HAVE HAD THE INTENT TO CONTACT YOU OVER THIS FINANCIAL TRANSACTION WORTH THE SUM ($15.500.000..00Million USD) FOR OUR SUCCESS.

THIS IS AN ABANDONED SUM THAT BELONGS TO ONE OF OUR BANK FOREIGN CUSTOMERS WHO DIED ALONG WITH HIS ENTIRE FAMILY THROUGH PLANE CRASH DISASTER SINCE FEW YEARS AGO. (CONFIRM THIS) www.cnn.com/2003/WORLD/africa/07/20/kenya.crash/index.html

YOU HAVE THE ABSOLUTE AUTHORITY TO CLAIM THE FUND HENCE YOU ARE A FOREIGNER AS SOON AS YOU REPLY, STEP TO FOLLOW IN ORDER TO FINALIZE THIS TRANSACTION IMMEDIATELY WOULD BE DECLEARED TO YOU. I EXPECT YOU'RE URGENT COMMUNICATION

The founding fathers envisioned a republic, not a democracy, for as every schoolboy knew (then, not now), 'twas a democracy that condemned Socrates. The notion of universal suffrage took more than a century and a half to become a reality in the 1960s. But were the founding fathers right about the ability of the average person to think clearly enough to vote? Let us review a few statistics:

-"nearly 23 million Americans — 9.2 percent of the population twelve or older — are hooked on alcohol or drugs" (see here)

These statistics explain how Obama won the presidency. The Rasmussen poll has some interesting statistics about voters. Rasmussen asked people if they were liberal, moderate, conservative or not sure on social issues and liberal, moderate, conservative or not sure on fiscal issues. Seven of the 16 possible combinations had non-trivial percentages of voters. These include:

Although 49% of Democrats see themselves as fiscally and socially moderate, their candidate, Barack Obama, is socially and fiscally of the extreme left, to the left of liberal on both social and fiscal issues.

We can explain the reason for widespread support for Obama among Democrats. With 25% of Democrats mentally ill; five percent having sex in the election booth; 9.2% voting while on drugs; 47% getting stewed the night before the election; and 5% thinking that the voting booth is a slot machine, it is really a matter of random chance as to who wins.

Wednesday, December 23, 2009

Fear and hatred of any group of people is wrong for several reasons. First it is unfair. Second it is exclusionary. Third, it is counter-productive. For that reason, I am distressed at the ongoing anti-Christian Christophobia I have been witnessing in libertarian and in left wing circles. The idea that "all Christians are bigots" or that "all Christians are authoritarian" has gained currency among educated urban elites. This parallels the prejudice against the inner directed that David Riesmann displayed in his otherwise classic book Lonely Crowd. The notion that urban consumerists are superior to Christian and Lockean "hicks" has simply gone too far for too long. I am tired of the hate.

Jamie has already written several excellent blogs. In "The Hand that Rocks the Cradle" Jamie discusses rather frightening proposals of State Senator Irma Clark-Coleman (D-MI) for Michigan to follow the totalitarian pattern of Spartan education (also advocated by Plato in the Republic) of brainwashing, er, educating children in state-run schools starting from early childhood. Coleman has recently proposed to reduce the starting age for kindergarten by one year. With a totalitarian, would-be "philosopher-king" like Barack Obama in the White House*, we can rest assured that the the crackpot idea of universal 0-5 education stands a good chance of passage at the national level as well. Little children must be taught to goose step and give Democrat Party, palm up salutes as young as possible. Moreover, the program would end day care and related small businesses. Jamie notes that:

"Birth-to-grave education is contrived by the global elite as an underhanded attempt to grab our children at birth, and indoctrinate them into their “global citizenship” idealism. It is an affront to America to allow not only the destruction of our small businesses, who care for children in a loving environment, but to force our children into government controlled indoctrination camps, where they will be taught international philosophies, instead of American values. The elitists know that if they can teach our children their ideologies from birth, undermining their parent’s morals and religious beliefs, they will backdoor their way into the minds of our youngest, indoctrinating them with their global idealism."

The fact is, the public schools have failed as institutions. They have failed for the following reasons:

(1) The education theories used in public schools have too often depended on distortions of John Dewey's ideas on progressive education. They do not work. When the "creativity first" approach is used in math and writing, and the "look say" method is used in reading, students fail to learn. The worst victims of the failed "creativity first" theory are inner city children, large numbers of whom have been crippled for life by the education system.

(2) America's school teachers are greedy, selfish and incompetent. They have failed in what should be their mission, educating the young, and replaced that mission with "ME FIRST"; "PAY ME MORE"; and "I SHOULDN'T BE EVALUATED". Their teachers' unions have used every specious argument in the book to deflect the harm that they have done to education.

(3) The schools have too often engaged in ideological brainwashing, left wing propaganda and politically correct double talk and have failed to provide a common culture or a competent education to children.

(4) The schools are run by teachers and administrators who are themselves poorly educated and, even if (2) were not the case, lack the education needed to educate others, including children.

0-5 education would be a disaster for several reasons. First, it would give the ideologically motivated bigots who dominate our school system five additional, formative years to convert American children's minds to their left wing ideology. Second, it would deny children the additional time with their parents crucial to withstand the prejudices and incompetent education to which they are currently subjected in grades k-12. Third, as bad as the current crop of schoolteachers are, and as unqualified, there is no doubt that expanding the base of selfish, bureaucratic slime that works in education would reduce the quality of the teaching staff well below its current dismal level.

Rather than add five destructive years to the time children spend in public schools, a voucher system should be established and all schools should be privatized.

But Jamies doesn't stop with education! In a post on gay marriage entitled "We Are Not Homophobic" Jamie points out that:

"In response to Maine rejecting gay marriage, once again, many in the homosexual community have deliberately, or ignorantly, labeled those who oppose this measure as homophobic. Being a Christian, allow me to clarify this psychological diagnosis for the gay community. We are not afraid of you."

Jamie points out that she disagrees with gay marriage on religious grounds, not because of homophobia. In my view, there is a greater degree of Christophobia on the part of New York Times-style left wing extremists as there is homophobia among mainstream and moderate Americans who believe in God.

Fresh Conservative is an impressive website and I am looking forward to reading more of their stuff.

*Hope writes that Obama has already backed 0-5 education: "In a White House press release dated March 10, 2009, 'President Obama is committed to helping states develop seamless, comprehensive, and coordinated ‘Zero to Five’ systems to improve developmental outcomes and early learning for all children.'"

Jackson was great but had serious flaws, such as his treatment of the Cherokees. His appointee was Chief Justice Taney, writer of the Dred Scott decision, which furthered slavery and led to the Civil War. The spoils system was a kind of democratization but was an error, leading to the special interest politics of today.

His great act was abolition of the national bank. But his advocacy of democracy led to Progressivism within a century, even though he was a libertarian. He could not conceive that more democracy would lead to less liberty,a strategic blunder.

Many still think with Jackson that more democracy is consistent with greater liberty, but the facts do not bear out his theory. The founding fathers knew so, which is why they constituted a republic, not a direct democracy. Socrates had learned this in 399 BC as well. To maximize individual liberty, a conservative state is necessary. Jackson had not studied history as had Jefferson and Hamilton. Although Hamilton was a socialist, his emphasis on republicanism would have led to greater freedom in the long run than the trend toward greater democracy that Jackson initiated. Jackson focused on structure, the central bank and the powers of the central government, and was right in his ideas on those issues, but he ignored historical processes that ultimately subverted his libertarian democratic ideal.

You've just blown a hole in the bottom of the budget and ignored a large majority of Americans both Liberal and Conservative.

This mess takes the worst of both worlds and combines them into a toxic and totally unaffordable cocktail that nearly everyone except yourself will have to pay for.A more honest rendering of the cost of the bill, knowing what expenses will actually be covered, what budget cuts will actually happen, and tossing in the front loading of revenue, creates a final tab close to 3 Trillion dollars. And here is the clincher it still leaves 15 Million people, or more, uncovered. WOW!

Dick, I have got to admire you, really. If I gathered 100 strangers together to try and make a worse bill, I couldn't come close. Yet, somehow you and your colleagues found a way!You must be so proud.

Radical Academy blog posted this excerpt from Mortimer J. Adler's discussion of an excerpt from Herodotus about Solon, the founder of Greek democracy, and his visit to Croesus, the richest king in Greece. Keep in mind that discussions about "happiness" in ancient Greece are complicated that the word for it, eudaimonia, was different from our word happiness. It meant well being or flourishing as well as happiness. It wasn't limited to the purely emotional state. The differences in language create differences in thought. But the insights are very powerful. The ancient Greek language was rich and wrenching. The Greeks probably would have found English dull.

> Solon set out upon his travels, in the course of which he came on a visit to Croesus at Sardis. Croesus received him as his guest, and lodged him in the royal palace, and had his servants conduct him over his treasures, and show him all their greatness and magnificence. And when Solon had seen them all. Croesus said, 'Stranger of Athens, I have heard much of your wisdom and of your travels through many lands. I am curious therefore to ask you, whom of all the men that you have seen, you consider the most happy?' This he asked because he thought himself the happiest of mortals: but Solon answered him without flattery: 'Tellus of Athens, sire.' Astonished at what he heard, Croesus demanded sharply, 'And why do you consider Tellus the happiest of men?' To which the other replied, 'First because his country was flourishing in his days, and he himself had sons both beautiful and good, and he lived to see children born to each of them, and these children all grew up; and further because, after a life spent in what our people look upon as comfort his end was glorious. In a battle between tie Athenians and their neighbors near Eleusis, he died gallantly upon the field. And the Athenians gave him a public funeral and paid him the highest honors.'

Thus, Solon admonished Croesus by the example of Tellus. When he had ended, Croesus asked angrily, 'Is my happiness, then, so little to you that you do not even put me on a level with private men?'

'Croesus', replied the other, 'I see that You are wonderfully rich and are the lord of many nations, but as for your question, I have no answer to give until I hear that you have closed your life happily. For assuredly he who possesses great store of riches is no nearer happiness than he who has enough for his daily needs. For many of the wealthiest men have been unfavoured of fortune, and many whose means were moderate have had excellent luck. The wealthy man, it is true, is better able to content his desires, and bear up against sudden calamity. The man of moderate means has less ability to withstand these evils, from which, however, his good luck may keep him clear. If so, he enjoys all these following blessings: he is whole of limb, a stranger to disease, free from misfortune, happy in his children, and comely to look upon. If in addition to all this, he ends his life well, he is truly the man who may rightly be termed happy. Call him, however, until he die, not happy but fortunate.'

I watched Marc Forster's 2007 Kite Runner last night on Showtime. Three to four star movies are rare, and this is one. Based on Khaled Hosseini's novel, it talks truthfully about the pain the Afghans suffered under the Soviet invasion and then the Taliban. It is about friendship, boyhood and bravery. If you haven't seen it yet, I highly recommend it. Marc Forster's direction is elegant. Hosseini's story is marvelous. Finally a movie with a first rate plot. The acting is magnificent across the board. Khalid Abdalla as Amir and Homayoun Ershadi Baba are both excellent, as is the entire cast. This is a fine film.

Monday, December 21, 2009

The tipping point for freedom versus servitude is necessarily vague. Certainly, if we depend on the state for our livelihood, we cannot choose an alternative and so are not free. If James Turk's claim that 58% of Americans depend on some level of government for their livelihood is true, that means that the majority are no longer free. It is no longer a matter of choice as to how we make our living. Like slaves, the majority are compelled to live and die at the behest of masters.

James Turk has an excellent blog on Kitco. Turk suggests that the coming government debt crisis across Europe will trigger a reassessment of the current pervasive socialism. He extensively quotes Hayek and makes the argument that government uses wars and emergencies to expand state power. The extended state power continues during peacetime to expand the welfare state. The welfare state become subject to special interests and expands relentlessly. Presumably, in a democracy the public is not smart enough to understand the effects of the expansion, namely, declining standards of living and opportunities to make a living. As the state expands wealth declines. I would also add that income inequality increases because of government policy--specifically the Federal Reserve Bank's handling of monetary expansion. Turk argues that with the coming bankruptcies of many countries, the destruction that socialism wreaks is laid bare. Turk writes:

>"The ideological bankruptcy is neatly captured by British author and advocate for individual rights, Cecil Palmer: 'Socialism is workable only in heaven where it isn’t needed, and in hell where they’ve got it'. And government insolvency is explained by famed economist Frederic Bastiat, who made this levelheaded observation nearly 150 years ago about the nascent modern socialism then emerging. 'The State is that great fiction by which everyone tries to live at the expense of everyone else.' More recently, Margaret Thatcher, being a sensible politician, put it pragmatically: 'The problem with socialism is that you eventually run out of other people's money.'

>"Take Greece for example. This past week yields on its 10-year bonds surged in the wake of downgrades by the bond rating agencies, which finally recognized that Greece does not have the financial resources needed to repay its debts, which now stand near junk levels. Not far behind are Latvia, Spain, Ireland, the United Kingdom and almost every other country in Europe, even though they may still flog paper rated as “investment grade.” The reality is that the rating agencies just have not yet come to grips with the breadth and depth of widespread government insolvency, or have willingly turned a blind-eye to it. And don’t forget Iceland which of course has already collapsed."

Might socialism die with a bang? I doubt it. Americans and Europeans have adopted the mentality of slaves. 58% of the American population depends on some level of government for its living, according to Turk's numbers. And we wonder why income inequality is on the rise and the real hourly wage hasn't risen in 40 years? The blame must rest in part with academic economists, whose policies have been as short sighted as their econometric regression models.

What would a major international debt crisis do to the stock market? To gold? Intuitively I would think stock market down, gold up. But last year it was both down. It is extremely difficult to predict the markets because Wall Street has a strong pro-dollar mythology that will only quit when the US dollar goes the way of the Continental in the post Revolutionary War period.

Sunday, December 20, 2009

My old childhood friend from Queens, Barry (actually, it goes further back because our mothers were friends in the Bronx in the 1930s and 40s), just sent me this message about the dollar on Facebook and I respond.

Barry:

>Is the "problem" with the dollar that it is too high or too low in comparison with other currencies? If the dollar falls, all of our export industries become more competitive, but we end up with a dose of inflation because our imports become more expensive. If the dollar strengthens, we keep cheap imports but have an increasingly hard time competing abroad. Which is better?

My response:

>That's one of those paradoxes, much like wages. Should an employee be paid more or less? If less, he cannot afford to pay his bills. If more, his employer may go under. Which is better? The answer is that practical human reason cannot answer that question. Rather, market forces can deliberate for us. Allowing the market to do so has the effect of allowing resources to be used most productively. If we set wages too high, there will be a reduction in demand for labor and a surfeit of supply. If we set them too low, there will be a labor shortage and the best people will start their own businesses. Rather, let us allow the market to tell us how high wages ought to be, and firms produce efficiently and fairly.

Being fair to both sides allows supply and demand, including supply and demand for labor, dollars, shoes and anything else, to fall into equilibrium. With respect to dollars, that would be done by letting them float. Firms might lose some predictability with respect to their overseas plants, but why should the public subsidize the risk aversion of big companies? Let them stay home if they wish to avoid currency risk.

In the post war period there was a peg to the dollar. But President Nixon printed too many dollars and so the peg was not sustainable. There was a run on the gold in Fort Knox as foreigners (Americans were not permitted to do this by law) cashed in their dollar bills for gold. So Nixon (a) abolished the transferability of Euro dollars into gold (that had been done for American dollars by Roosevelt in 1932) and (b) floated the dollar. Floating exchange rates, which I believe were suggested by Milton Friedman, work great in theory, but firms required long term stability to make plant decisions. To accomplish this stability, the central banks, the Chinese, Japanese, Saudis, Europeans and others have been holding onto large sums of dollar denominated bonds, informally duplicating the pegging system of the post war period. But the US has been printing more and more dollars. This makes us richer at the other countries' expense. You can cheat others once or twice, but over many decades they began to grow weary of it.

You are right that there are distributional effects of monetary policies. Under the current system the global demand for dollars is exaggerated (also exaggerated because the legal tender law increases domestic demand for dollars--we are not allowed to refuse dollars as payment for goods or services). As a result, the dollar made strong by foreign holdings makes our exports less competitive. More generally, the stability of the artificially propped up dollar has encouraged firms to move overseas. A propped up dollar benefits US manufacturing firms that have moved overseas, and so this policy has contributed to de-industrialization. Also, the Federal Reserve Bank's interest rate and monetary expansion policies have facilitated many firms' moving overseas.

The US government has thus encouraged de-industrialization, driving out manufacturers and sending them to China. China also has low labor costs, and it is difficult to say exactly how much of the move is due to the artificially high dollar and how much is due to low labor costs in China. My guess, which is completely intuitive and not rational, is 20% is due to money. So that 20% of manufacturing might come back here if the dollar were allowed to float.

The up side (besides the huge benefits to manufacturing firms and Wall Street) is that consumer goods have been cheaper.

The down side is that the system is unfair and so unstable. Winding down the dollar subsidies by the international central banks will hurt the vast majority of Americans. The dollar's purchasing power will diminish so that people will become poorer. The real cost (inflation adjusted) of all goods will go up, also guessing, 20%. Maybe a lot more, but no one knows.

So imagine a situation where there's a 20% increase in factory jobs and a 20% reduction in standards of living. Will most Americans appreciate the trade? I think there may be widespread dissatisfaction, and maybe rioting in the streets. But that extra margin (maybe 10% maybe 100%) of benefit to consumers will be lost to us.

On the one hand, the deal has been sweet for US consumers. But on the other, like all subsidies, for instance a rich heir who does not have to work, the windfall has made Americans used to an artificially high standard of living. Note that the standard of living we should be enjoying today is probably not that much higher than it was in 1971. Real (inflation adjusted) hourly wages from 1800 to 1970 increased around 2% per year. Since the abolition of the gold standard in 1971 real hourly wages have increased a total of 2% in almost 40 years. More people work two jobs now and much more families are two income, so it's not going to affect most people to the degree that they will have to give up all the consumer gains. But our standard of living, for the first time in history, probably needs to be adjusted downward by a sizable chunk. The retailing jobs that we will lose because of lower consumer demand will be replaced by manufacturing jobs.

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Mitchell Langbert

About Me

I have researched and written about employee benefit issues and in my previous life was a corporate benefits administrator. I am currently associate professor of business at Brooklyn College. I hold a Ph.D. from the Columbia University Graduate School of Business, an MBA from UCLA and an AB from Sarah Lawrence College. I am working on a project involving public policy. I blog on academic and political topics.